Ignore the Balance Sheet at your own peril!
Your Balance Sheet is an absolute gold mine of data and provides great insights into the financial state of your business.
Which is why I am always surprised when business owners aren’t interested in the Balance Sheet.
It is the one report that is able to identify where you are financially, at any given point in time. If your Balance Sheet is incorrect it also has a flow-on effect because then you can’t necessarily trust other reports, such as your Profit and Loss Statement.
A balance sheet is simply:
What you own (ie. Assets – such as cash, what people owe you (debtors) and other physical assets like equipment)
What you owe (ie. Liabilities – such credit card debt, money you owe suppliers (creditors) and loans )
What remains is what belongs to the owners of the business (owners equity).
It is what remains that allows you to grow your business and tells you whether you are better off over time. The financial health of your business can be reviewed by analysing the data and looking for trends, such as days debt is outstanding, cash flow month to month, regularity of replacement of equipment etc etc.
Why would any savvy business owner not want to know if all the blood sweat and tears they put in are actually growing their investment from month to month??
It’s also a really great tool for being able to check on whether you can trust and rely on your profitability reports and may also reduce the chance of theft from within.
Your Balance Sheet is even more readily accessible these days, if you are using an online software such as Xero – it automatically calculates it for you once the reconciliations are done.
So there really is no excuse!
Love Miss EBS xx
If you would like some assistance to better understand and analyse your balance sheet, please get in touch today!
- Posted by admin
- On March 30, 2016
- 0 Comments